Sunday, July 24, 2016

Can the mortgage rates be negative? – Le Figaro

FOCUS – Short-term interest rates fell below zero. But that does not mean it is possible to take a short-term credit under the same conditions. The variable rate loans also have very little chance of becoming negative.

Some borrowers dream. Since short-term interest rates fell below zero, is it possible to take out a loan of short duration with negative rates? In other words, enjoy the same conditions as the French State, for example, which borrows in part from many months to negative rates. “With real estate loans, it is technically impossible. The rates can not be negative when signing the contract, “says Michel Mouillart, professor of economics at Paris West.

Only those who have subscribed some time ago a variable rate loan can be in this situation. Especially if it is not capped, that is to say, it does not include rate of change limit, upwards or downwards. But, again, chances are almost nonexistent because the banks take commission, which increase the cost of credit.

Fewer and fewer banks offering loans at variable rates

To avoid being confronted with this problem in the future, many institutions will offer more loans variable rate. Now, the share of variable rate loans represented only 0.1% of mortgage production, according to the observatory Crédit Logement / CSA.

France is no exception. In Switzerland, for example, where the rate of government borrowing to 10 years is largely negative (-0.56%) for one year, individuals into debt with mortgage rates close to those prevailing in the ‘Hexagon.

However, in other European countries, some lucky individuals now earn money with their debt. Because the rate of their mortgage variable rate subscribed few years ago fell below zero, are not the ones paying monthly interest on their bank, but the reverse. For example, a customer who repays monthly 500 euros capital shall pay only 490 euros if the advantage represented by the negative rate amounts to 10 euros. Some Danes (758 customers in 2015 of the Realkredit Denmark) and the Belgians happy experience …